Institutions, Market Exchange, and Development

Abstract

As a system of organized exchange, the character of a given market reflects the rules that shape it. Abstract debate framed as to whether “the state” or “the market” is better in promoting development is therefore bound to miss the point. In the real world, the problem-solving potential of any market—and hence its capacity to facilitate development—depends critically on how the context of exchange is structured. These rules of the market are a part of any problem-solving community’s common institutional resources. A robust market relies on rules developed and fostered by the governing institutions— whether unofficial or bearing the escutcheon of the state—while the reason for governance, as a facility for problem-solving, is realized through processes of market and nonmarket exchange.